Do Canadians Need To Wait To Become Their Own Banker?

Show me someone that will do this for seven years, seven years just to build a banking system and I will show you someone that has conquered Parkinson's law.

If you're really going to make a difference long term, you know, universal truth out there is that, you know, anything worthwhile doing takes time, dedication and effort to get it done.

Canadians have a really good reputation of paying their bills. So we have to take that exact same brain power, that exact same programming to implementing the process of becoming your own banker.

I've got two my amazing colleagues with me. I invited two wonderful fellows. I've got the, the, the dazzling Dan Allen and, and the, and the vibrant Vernon McCarty with me here today. And we are, we have an interesting topic. So, you know, Dan, kind of had this come up a question recently from, from a client. And these are the kind of questions that we do get from people from time to time. And I thought it'd be a good discussion point for us today on our live chat. And so Dan, why don't you hit us up with kind of the, the overarching. We won't go into like the detail aspect of the question, but just, you know, overarching. What, what was this commentary all about? And had a reference to Nelson's book.

That's a great question I got from a client. And I, and I just go, okay, this is first off, you know, he was really intent on learning. And so he was taking in a lot of content. He was taking in a lot of our great videos. He's been reading a multitude of books. And of course, you know, the book that we all go back to as kind of the foundation, which is, you know, Nelson's book, that's exactly it, called Becoming your own banker. So he was diligent at reading that and he said there's a bit of, you know, I just have a question for you, Dan. And that question is, is when I, when I read Nelson's book and all of his examples, he shows capitalization and end utilization and a lot of the other publications and even videos, I'm learning from them that I can start utilization early on. Like, it doesn't show no four or five year capitalization phase. It shows use. And so this client was just a little bit taken back about the difference in the message. And he's saying, so can you help me understand why, why is there that difference between the way Nelson spoke about it in his book and then some of the other great resources that are out there that are helping our clients every day get better at this process where we show them how you could start to utilize the equity capital that they have built up right away. So that's kind of the essence of the question. Why is there that disconnect between Nelson's book and some of the other stuff you hear out there about how long you have to capitalize before you put your money to work?

What's really interesting is a lot of our video content, even. You're talking about content resource or our content on the Bankers Vault Channel, the podcast and wealth. Basically, we talk even about utilization right away. And one of the reasons for that, of course, is that, you know, especially when people are first learning this, you know, a lot of times we don't have maybe the patience level that people used to even 20 years ago. Everything. Everything's an I want it now, you know, mentality. Like, if you're walking around and you've got one of these magical little computers in your pocket, and it's like, I was. I had a conversation with some family members over the Christmas holidays about how, like, oh, yeah, you pay for all these things. You get your phone, you pay for all this stuff. But, like, you don't even. Like, I just want to call people, like, some people who just want to use it as a phone. But you can't go buy a normal phone anymore. You have to get an entire computer that replaces a camera and alarm clock and, you know, like, your wallet in some instances, like, it's got every gadget under the sun. It's your communication platform. You can run your business off of it. Like, it's all of these things. Well, of course. That's why they're like a thousand dollars to go buy them out.

Right.

And.

And so we don't live in a patient society the way that we, you know, used to, certainly when Nelson grew up. And so Nelson even references that in the book about how our thinking has to be adjusted a little bit. And he specifically talks about human conditions. He mentions a number of them, and one that's a huge focus is Parkinson's Law. So Parkinson's Law talks about a variety of factors, and, you know, expenses rise to equal income. I'm sure if you're watching this, you've experienced, you know, that in your own life. Hey, you got a pay raise. Great. Where does it go? I don't know. It just disappears into the budget, you know, also. And you're wondering why the Tim Hortons cups keep piling up in your garbage more than they did before and, you know, more Starbucks and stuff, and why.

You have an extra set of keys in the, in the drawer there.

Extra car keys. That's right. Oh, there's a hot tub. All of a sudden, that showed up in your backyard. Interesting. Where did that come from?

Right?

So like, you know, we wonder where the money goes, and that's what happens. Like our natural condition is, you know, to find a way to put, to put that to use in some way. Whether it's good use or bad use, you know, that's something you got to decide for yourself. But Nelson even indicates, and Dan, you know, I were talking about this in his book. We'll talk about one of the examples in the twin sisters, which is on page 45 of the book. Great. Leading up to that, on page 42, you and I were trying to look for it in like my book. It's all like, I've got all these highlights kind of here. So it's right, right in this section. I'm like, oh, yeah, I have that highlighted in two different colors and underlined. Imagine that. So this is, this is on page 42, and it's on the first column, you know, about a third, you know, two thirds of the way down the page, talking about two twin sisters and they're accumulating money and they're gonna, their goal is to self finance cars throughout their lifetime. That's their sole goal. Soul objective. Nelson says, person accumulates money on a monthly basis in a savings account and then buys a certificate of deposit, which is a gic. In Canada, it's the same thing at someone else's bank in the amount of $5,000 a year. So that, so every year you're putting money away, saving. Then annually you go get a gic and then you do that for a number of years. Show me someone that will do this for seven years, seven years, just to build a banking system, and I will show you someone that has conquered Parkinson's law. He will win by default in comparison with his peers because they cannot discipline themselves to do so. The whole idea here, what Nelson's really trying to teach us is he's not saying that you, you can't use the policy earlier, your banking system. He even shows you how to create a banking system without an insurance contract. It's just less efficient than the insurance contract. So like, if you're going to choose two different options or three options, like your shoebox and a Safeway bag tucked underneath your bed or whatever, you know, it seems like a really dangerous place to leave, you know, loose cash flying around. But, you know, you could, you could bank out of that Like a shoebox if you really wanted to, but it's not very efficient. And then if your house burns down or you get like the flooding like we had around Chilliwack, I mean, you're going to have a big problem with all that capital. Of course, the new Canadian money would probably float pretty well. Seems to do okay if it goes to the washing machine.

Yeah, but.

But, you know, the key thing is you got to conquer Parkinson's law. He's not saying you can't use it earlier, but if you can't demonstrate the discipline of continued capitalization over a lengthy period of time, five years, seven years at minimum, then, then you're going to create problems in your own life because you can't discipline yourself to do so. That's kind of the general premise.

So I was thinking as you were talking there, Richard, about, you know, Nelson's golden rules, and one of the ones he put a lot of emphasis on is don't be afraid to capitalize. And I think that's part and parcel of really, when you think about what he was trying to educate us on as he went through his presentations, it was really trying to help people understand that if you're really going to make a difference long term, you know, universal truth out there is that, you know, anything worthwhile doing takes time, dedication, and effort to get it done. And so he really wanted us to think about that human behavior. How do we overcome that, you know, that desire that we all have it. I think we've all experienced it where we get some. We get money and who it's like, we can spend it and the next thing you know, it's gone and he's thinking about the future. Think long range was another one of his golden rules, like think long range. And I think why he demonstrated that in his book, for me, that's a.

Big part of it.

And the other piece, and I think it goes well to his second book, which is, you know, building your warehouse of wealth. It's like the opportunities that will seek you out when you have a pool of capital that's readily available compared to someone else that may not have access to that capital. I think that's where, you know, people get hung up on rates of return. Well, it's not about rates of return. And, you know, in our, in this product, it's about capitalization and what you could do with that capital if you've got an opportunity that you can change, you know, a financial outcome in your family or in your business, and you can do it right away because You've started to capitalize the system. Well, that's an opportunity you don't want to let go.

A couple things that I want to share. The first thing is, Dan, I want to acknowledge you and I want to acknowledge your clients. They did the right thing. First thing you said is, hey, I've been reading. I've been watching videos. And they studied. They're starting to learn the process. This is called becoming your own banker. It's not like, hey, I want to buy one of those banking things, and you give the guy the money and you set it and forget it and walk away. It requires continued learning, continued education. It's a lifestyle. It's something that you're going to study your entire life. And the second thing that your client did that was really smart is not trying to do it on their own. They actually reached out to their coach and they said, hey, coach, what's going on here? This capitalization thing. And some people are talking about using it right away and how does this all work? So I think that's really brilliant. And what I'm going to expand on in my own mind is one of the questions. I'll be totally straight with you guys. Drives me mad when people show up in a call and they say, so how long do I have to put premium in? Vernon? I go, look, it just keeps getting better. So if this thing just keeps getting better, I keep pumping it in, and my return on those dollars, my return on effort, the amount of capital that I can access, is just going to expand over on time, over time. Why on earth would I want to stop putting fuel in that thing? I am never going to stop capitalizing. So that's one of the things, I think sometimes people collapse when they read Nelson's book and they go, oh, capitalization period. Oh, I only have to put premium in for five years or seven years or whatever that number is. Well, yeah, but if I put it in an 8 and 10 and 11 and 21, it's just going to get better. So why on earth would I ever stop? So let's not collapse that. Nelson's just trying to isolate some specific points in his book, and he's probably making some assumptions that maybe. Maybe there's some missing information there. But the point is, is he's just trying to get people to think differently about what you're presently doing today versus what you could be doing and how you can actually utilize the system.

In Nelson's book, in all the examples where he shows, you know, like, equipment financing and. And, you know, you Go through these different illustrations, like, wow, yeah, it's getting better. Like this person gets a larger retirement income, but people don't recognize what's happening. There's little footnotes in the bottom that talks about the extra interest. Well, the extra interest, it's in air quotes, literally, like Nelson would have used. He would have said parentheses, you know, I'm lazy and I like the air quotes. So I put the air quotes up. And, and he, he's saying the extra interest isn't actually interest, it is actually extra premium, which is capital, which is adding to the cost basis of the policy. It's equivalent to what he would have been paying some third party. Someone else was going to get the equipment financing guys money. He's just redirecting the flow of the same energy of dollars into a system that he has ownership and control over in mutual free contract with a whole bunch of other people through, through voluntary contract with an insurance company where he gets to share in the profits. And because it's adding to the cost base, it's actually more premium going in. It increases all of the numbers and everything gets better. That's what Nelson's really trying to get people to see. And so one of the reasons why as an example in Nelson's book In Equipment Financing only shows premium deposits for four years is because he needed to be able to show not putting premiums in so that when he added extra capital in, you could see the impact of it.

Right.

So whereas if that person just kept funding that, that policy, all of the numbers would have been better than what Nelson showed in his book. In fact, Nelson does an example. He updated the book in a, in a later revision because he kept getting questions. Well, this book was written a long time ago and dividend scales were bigger back then. This isn't, this isn't, this doesn't work anymore. This isn't relevant. It's outdated. Oh, really? Yeah. He shows another example of adding more premium in year five, basically doing five years of capitalization in the exact same example, but at a lower, you know, dividend scale, which is relatively irrelevant. But because of that extra capitalization, all of the numbers on everything got far, far better, far more superior because of the way that the machine works. And so one of the things that you've, you tied on, Vern, is that, you know, you're never going to stop putting capital in. I don't plan to stop putting capital in either. Now you might want to have the choice or the option to. Having the choice or the option is about control, control, control. Doesn't mean that you want to. And so Nelson, in my opinion, he says it so clearly. It's clear as day point number two on page 85 of the book. If you knew, you knew at passive income time that you would be getting back every single dollar you put into a system potentially tax free, would you ever object to putting more money into it?

Earlier, Dan, you know, you said something about discipline and I think Richard might have. I know Richard mentioned discipline. I just wanted to point this out because a lot of times people get super excited about, oh, I'm my own banker, I have all the control. I can recapture the debt on my Ford F150 and then I can just stop making, oh yay, I paid it off five and a half years early. I don't have to make payments anymore. And what did Nelson say about that? Like, look, if I'm going to go in and do business with a commercial bank, I'm expected to make a payment. And what do Canadians do? We bend over backwards to pay our bills. We work really hard. Canadians have a really good reputation of paying their bills. So we have to take that exact same brain power, that exact same programming to implementing the process of becoming your own banker. If I'm going to borrow money from my system to pay off Ford Credit Canada, you better believe I'm slamming just as much if not more money right back into my policy. I'm just going to redirect those payments and I keep that discipline going. The difference is I'm the one who gets to recycle those dollars and harness that financial energy by putting it back into a system in a company that's very profitable that I co own. So don't steal the piece.

It's no, it's no different than if you had that car, that vehicle payment. It was $1,000 a month for the truck payment and you just put it back in your savings account. The only difference is if you put it in your savings account, it's not as efficient as if you put it in the policy. As a loan repayment, it's the best way to save. If you have a system like this and on page 52 of Nelson's book, he says, pay close attention to this point. It is vital that you understand that he must, he's talking about the equipment financing. He must set up a loan repayment plan that equals or exceeds what he would have had to pay a finance company that he was using in the past. His life insurance agent should coach him at this point that the policy loan interest is for example, let's say 8%. But we're not going to play that game. We're going to call the finance company you were using and ask them what you would have to pay if you financed with them. And, and of course you're going to pay at least that or better. The more capital you put in, the better the whole machine gets is, you know, the summary point. So he hits these points multiple times and he does it in different ways. And sometimes people, you know, reading the book one or two times, it's hard to connect all the dots together.

As you're speaking there, Richard, I thought of another example that Nelson has in his book and he mentioned this a multitude of times. I heard him say it live and I heard him. It's in his book about even the something as simple as, you know, the insurance that we put on our vehicles. And you know, he teaches you that over time you can stop. Once you've got enough capital in your system to cover the capital loss of your vehicle, you can stop paying that collision and comprehensive insurance. And what did each coaches to do? Well, you put that, that money that you were sending away to someone else into your own system. So you continue to capitalize. It's about capitalization. The more capital you have, the more opportunities you have. And if you're going to do one thing in life, if you can build a pool of money, pool of capital that you can access and better yet, because when you get to be my age, you start thinking more about, you know, the next generation that they can utilize to help them through their financial journey in life. Once you've got access to that capital, get out, you know, put it to use, put it to good use. But the other thing is never forget that you got to continue to put capital into your system. And I always like to look on someone's face that aha kind of moment when you show them, hey, after 10 years, if you put your premium in again, this is the kind of value that that's going to drive. And they just go like, they just like a, oh, that's a real eye opener. An aha moment for them because they go, why would I stop putting it in at that point? Because that, that's just getting efficient. Like the, you know, Nelson's example of the steam, like it's got energy, it's built energy. That's page, you know, page 15. If you want to read in the bottom right hand corner about steam and just generate energy and once it starts to get that energy going, why stop it? I think that goes Back to what Vern was saying, why would you stop putting capital in? But you can. And there might be a time in your life where you choose to, but the longer you capitalize, the more opportunities you're going to get.

And if you think about that steam, the steam engine specifically, think about it, think about a steam locomotive, how much, how long did it take them to get that steam building so that it could get speed and get inertia? And if you know, the person who's, you know, firing wood into that steam engine there to keep it going, if all of a sudden they take a break and go for a smoke, well, what happens? That thing runs out. It runs out of fuel and energy and it starts to just shut down. And you got it. You got to really just go and grind that out to try to get that thing operating, you know, to efficiency again. And the page, you're referencing, one of my, two of my favorite pages, page 48 and 49 in the book, and I had to flip to them. So it's expanding the system to encompass all income. And he talks about that self insuring for, you know, you know, automobile insurance. And he says, you know, in time, the total cash values in all policies so whether you have one or you have multiple, are adequate enough to take the next step. Self insuring for automobiles for comprehensive inclusion. He says, please note, I did not say liability, but he says, look, if you got a vehicle, let's say you bought it for 30,000 and today, if you could sell it now it's only worth 10, what means if you're paying, you know, a thousand or twelve hundred dollars a year or something for automobile insurance, and you know, usually the comprehensive, the collision premium that is 50, 60% of the whole premium. Well, now if you're doing that for two vehicles and then all of a sudden you know, your kids get vehicles, and then your whole insurance rates go up. If you have, if you have 15 grand in cash values in the policy and your vehicle's worth 10, and you got to pay $1,000 deductible, that means if you get into an accident, the insurance company you're paying into, they're only going to give you nine because you got to pay a thousand dollars to get 10, right? So if you would pay that premium to those guys and you increased your deductible to pay a lower premium, well, wouldn't you pay a higher premium with zero deductible to yourself and put that energy into an insurance company that you own and control? It's just a great way of thinking.

You know, Richard, I love that you keep using the word energy because people like vastly underestimate, you know, everyone wants to see, oh, Vern, if I pay back my loans, like, how's that going to impact my dividend? And can you like, I can't. I'm not going to illustrate that. I can illustrate that. Look, how much is your dividend being impacted by flowing all of that energy to someone else's bank? How's that impacting the growth anywhere else? It's not really helping you a whole lot.

Right.

So the whole idea is just take that actual that energy. The life insurance company that I'm a co owner in, they're going to put that money to work to grow more profit and inevitably they're going to share it with the co owners of the business, I. E. The policyholders. Same thing as they do it at a commercial bank. Except you're not one of the owners of the commercial bank. Right. So they're taking your capital, they're putting it to work for other people's families, all of that energy. And the last thing that I want to share about that, Richard, is I think it's awesome that every single time either Dan or I open our mouths, you're in Nelson's book pulling up this specific page, which is awesome. But you talked about the steam engine. So just imagine you're saving money in someone else's bank and you're piling that money up and then it's. Maybe it's growing, maybe it's not, but you're piling the money up and all of a sudden life happens and you need to access the cash. That's equivalent to shutting down the train. And now I got to build up all that steam again just to get the engine going. Where we're taking the capital, we're putting that energy in the policy system. And I don't stop the train. I can access capital without slowing down the train. It's just going to keep on building momentum as long as I just keep shoveling the wood back in. So just being a responsible banker and sending that energy again right back to the policy.

I always go back to one of the things he said about it's an exercise in imagination. So we're only limited. That's why it's called the infinite banking concept by ourselves. And it's all begins with the way we think. That was one thing that he constantly told us. And so there's so much within that book and I just encourage people to go read it and reread it, you know, find sections that you really want to get into and, and understand. Like I spent a lot of time in that equipment financing one and I spent a lot of time in there with clients helping them understand the value of capitalization. And so when you think about all these great content that's available out there, whether it's in books like Gand Asset for Canadians or you know, some of our YouTube videos, they're all do a great job of helping you build your banking system and put it to use. But I'm going to tell you, all of what we do is based on one book and it's kind of the go to for all of us. It's this one here and we all have copies of it. You know, mine's tagged up and marked up. Richard has probably got more underlined than in mine, but he's been, he's been using his book longer than I've been using mine. But it's a tool that we utilize every day to help people understand how capitalization and utilization can make a difference in their life. So again, I, you know, as I, as we talk about this guys, I, I think about Nelson and that's a good place to go because, you know, he changed my life. I never expected that. I just happened to hear about this concept and what do you know, it changed, it changed my whole life. I'm, I'm doing something I would have never dreamt I was doing and it's because I believe in it and I know it works. So, you know, as you have questions, I'm just going to encourage you to reach out to your coach and, and ask him because that's how you learn.

The question that we're answering is why again, why are people using policies immediately, right away versus Nelson's book? He didn't do that. You know, Nelson never says that you can't get started. In fact, in, in session, in, in his live training session, he would have said, well, you could, you know, look at how much money was in here earlier. Could you have started doing something earlier? He would have said that in the live session. And this is the thing that support people understand this book is a stat. It's static. You're reading it, it's. There's nothing. There's no living energy on this book. There isn't. It's knowledge. But like not it's. For me, when I read it, it's like Nelson's talking in my head because he, it literally reads as though Nelson was talking. But it was really designed as a workbook for a 10 hour seminar. So this is 10 hours of jam packed one on one time with Nelson that you're reading. It takes you three hours to read it, which is why you should read it at least three times to get the full effect. The 10 hour seminar. Because that's, you would have had to sit with Nelson and he would have went through these examples, he would have directed you to specific points, points and he would have expanded on them and he would have got you thinking and he would have ad lib with stories like as an example in equipment financing he talks about self insuring for you know, collision vehicles. And he tells them. One of my favorite, one of my favorites is, you know, all of a sudden the, the Martians come down and they blast and what's that thing there? That, that down there, that logging truck? Oh let's, let's destroy that. And zap. He like melts this logging truck and he's like oh geez, Uncle Nelson, like I gotta go replace my logging truck. And he talks about. So he uses this whole example of the molten pile of metal that's a logging truck. He's like how often do you go see a logging truck over at the, you know, you see it in the mechanic shop but you don't go see it at the auto body shop. No one's going and repairing what the, you know, the blogging truck looks like because it's designed to get beat up. So why are you paying for this extra coverage in that scenario? So everything was a lesson and you don't get that story when you read the book. There's a ton that you're going to be able to learn by watching our more or more videos and recognize that what we're saying here is as you're putting capital into the system, when you chunk that money in, it gets efficient. All of a sudden you're putting 10,000 in and then you get 11 back. The next year you put 10 and you get 12 back. The next year you put ten and you get 13. The next year you put 10, you get 15. And it will continually do that again and again and again. If you had a bank account that could do that, how many of those would you want to own? It's really that simple.

If I'm putting In that same 10 right now, if I put that same 10 in for the next 40 years and, and I can get whatever that number is, I put in 10, I can all of a sudden get 40 out. We know that the purchasing power of the dollar is getting diminished every single day. How important is it for us to get more out than what we put in and get that ever increasing pool of financial value and the last thing that I'll leave with is this. I've noticed in my life that when I worry about things that are outside of my control life doesn't go real good. I'm very overwhelmed, I get stressed out, my energy drains. What I love most about the process of becoming your own banker it's all about what you can do. It's all about the things that are within your control and it puts the power back in your hands. So to me it's just a peaceful stress free way for me to live my life because it just allows me to focus on what I focus on everywhere else in my life, what I can control.

Make sure to check out some of the other videos that are probably appearing on the screen right now and continue your learning process and make sure you get a copy of that book.